US June CPI Set to Drop, But Gasoline Masks Stubborn Core Inflation

Washington — US consumer prices are expected to have fallen 0.2% in June, marking the first monthly decline since the pandemic, when the Bureau of Labor Statistics releases its report Tuesday at 8:30 a.m. Eastern. Economists attribute the drop almost entirely to a 15% collapse in gasoline prices between mid-May and the end of June, which is projected to pull the annual inflation rate down to 3.8% from May's 4.2% — itself the highest reading since April 2023.

Strip out food and energy, however, and the picture looks far less encouraging. Core CPI is forecast to rise 0.2% on the month, with the annual core rate barely budging from 2.9% in May to an estimated 2.8% in June — still well above where it stood at the start of the year at 2.5%. Services inflation, which covers rent, car repairs, dining out and recreation, is running at a 3.4% annual pace, up sharply from 2.9% in January and significantly above the 2010–2019 historical average of 2.6%.

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The divergence between a softening headline and resilient core puts Federal Reserve Chair Kevin Warsh in a delicate position as he faces his first congressional testimony since taking the role in May. Warsh must convince lawmakers he remains committed to defeating inflation without signaling rate hikes aggressive enough to further tighten already strained credit conditions — a narrow line to walk when the data sends mixed signals.

Energy markets add another layer of uncertainty. Oil climbed back to around $75 a barrel Monday after a fragile ceasefire between the US and Iran broke down, rebounding from pre-conflict lows near $65 but remaining far below the roughly $115 peak reached during the height of the conflict. That two-way volatility means June's gasoline-driven relief could prove short-lived, making the Fed's reliance on headline improvement even shakier ground.

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